HR Software Grows with Company Evolution

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By Karen Schwartz

HR Software Adoption Increases with Company Size and Maturity

The age-old model of the Human Resources department is decidedly manual: Employees typically interact with the department when they want to request vacation time, or pick up a paycheck, or have a problem with a coworker. For the company, the HR department has been a necessary evil; there has to be somebody to keep track of hours, recruiting and hiring, and payroll.

By necessity more than design, the role of the HR department today has expanded greatly. It’s no longer just a must-have, but a way to keep track of employees’ performance progress and track promotions and training, as well as monitoring sick days, vacation days, salary and bonuses. And on the employee side things have changed too. No longer are employees satisfied with taking what the company says without feedback. Instead, they want input into how they are portrayed to the company and each other. They want to make sure that the company is fully aware of their current certifications, the fact that they would like to travel overseas, that they speak three languages, and that they aspire to a hire position—within the company or elsewhere.

For most companies other than the smallest (say, under 1,000 employees), a simple payroll system just won’t do the trick. That’s where Human Capital Management (HCM) and Human Resources software comes in. Instead of presenting static data, these systems are comprehensive, flexible, bi-directional databases that track not only the information companies need, but allow employees to add what they want the company to know.

The most basic HR systems are usually part of a larger offering, such as the HR modules offered with large ERP systems. Oracle and SAP, for example, have these integrated modules with their ERP applications. For more detailed, flexible systems, some companies go the standalone route, often turning to SaaS-based or cloud HR solutions like those from Workday and Cornerstone, which allow for more sophisticated recruiting, performance management, talent management and succession planning functions. Some vendors such as Oracle have products such as its Fusion software which operates both as a standalone cloud HR solution and an integrated component with its ERP suite.

With these specialized HR applications, more employee processes are automated, cycle times are reduced and more intelligent analysis is possible. For example, it’s easier to achieve compliance with labor laws if you have a full set of information, including information volunteered by employees. Companies can reduce recruiting costs by identifying qualified internal candidates, and can more easily pinpoint employees with specialized skills or who are ready for advancement. It’s also easy to develop organizational charts that include what-if scenarios to show how the organizational structure would change if specific positions are rewritten, reassigned or eliminated. On the flip side, these business systems also provide better information for employees to actively participate in their own career development.

The larger the company, the more likely it will have a fully functioning HR system. Stacey Harris, a principal analyst for Bersin & Associates who follows this market closely, estimates that less than 30% of all companies have an HR information system, but that number jumps to about 80% for companies with 15,000 employees or more.

In addition to size, companies with certain characteristics are more likely to benefit, including those in highly audited or regulated industries, and those with more professional and less hourly workers.

Although HR systems are available on premise and via the SaaS model, Harris believes that the on-demand, SaaS or cloud HR systems will prevail, especially for companies with less than about 10,000 employees. That’s the sweet spot for hosted solutions: these companies often aren’t big enough to have the IT staff, core competencies or money for a huge ERP implementation that includes HR software, but are big enough to need the capabilities, automation and information.

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Less than 30% of all companies have an HR information system, but that number jumps to about 80% for companies with 15,000 employees or more.